Non-Competition Agreements
The business world often can be complicated and confusing. A recurring source of confusion is agreements not to compete. But what exactly is a non-competition agreement?
A non-competition agreement is often, but not always an agreement between an employer and employee where the employee agrees not to compete in the same line of business for a specific period of time after he or she is fired or quits. Employers generally require employees to sign non-competition agreements before they start working; non-competition agreements protect the employer’s trade secrets and key business information. Obviously, these agreements can limit some opportunities for employees who sign them. But they can serve legitimate purposes.
Generally speaking, courts do not favor non-competition agreements and view them as limiting and restricting an ex-employee’s right and ability to make a living. As a result, a valid non-competition agreement must take into account the time when it was signed; protect the employer’s legitimate business interests; and be reasonable in scope of the territory it covers, when it applies, and how long it lasts. If a court determines that a non-competition agreement is too broad, it might narrow the agreement and enforce the modified version. Or, the court might not enforce the agreement at all if the agreement unduly and unreasonably prevents the former employee from earning a living.
In order for a non-competition agreement to be enforceable in Tennessee, courts consider several factors such as the reason for the agreement; the economic hardship on the employee; whether the agreement serves the public interest; what locations the agreement applies to; how long the agreement lasts; and what type of jobs or businesses the agreement applies to. In Tennessee, courts also may consider how long the employee worked for the employer or if the employee received overtime payment.
Thus, if a business wants a non-competition agreement, it should retain a lawyer to carefully draft the agreement. There are pitfalls.
Before an employee signs a non-competition agreement, she or he should understand the agreement. Consider consulting with an business law attorney. If you signed a non-competition agreement, learn your rights. Also, know this: There may be legal remedies available. For more information, contact Nashville Attorney Perry A. Craft.
Perry A. Craft has dedicated his life to helping people in need. He has tried, settled, or resolved numerous civil and criminal cases in State and Federal courts, and has represented teachers and administrators before school boards, administrative judges, and the state Board of Education. Learn more about Attorney Craft.